Levying An IRA

What if your judgment debtor has a non-ERISA IRA
retirement account, can that account be levied to
satisfy your judgment?

One of many judgment-related articles:
I am a judgment broker, not a
lawyer, and this article is my opinion based on my
experience, please consult with a lawyer if you need
legal advice.

If you levy a non-ERISA IRA, you will probably get a
call from the brokerage's levy department, saying they
have frozen the judgment debtor's account,
and are investigating
whether that IRA account is exempted or not from
garnishments.

In California, CCP 704.115 indicates that an IRA is
exempt only to the extent necessary to provide for the
support of the judgment debtor when they retire. If the
debtor is currently not retired, it may seem the IRA
account can be levied.

However, it does not matter whether the debtor is
retired or not. The question is, how much money the
debtor will need to live on in the future, whether
currently retired or still working. So, it is very
likely that some of their IRA money will be exempt.

The factors to consider include the debtor's current
age, their likelihood of further contributions to their
IRA in years to come before retirement, the debtor's
other resources available for retirement, their earning
potential, and the debtor and their dependent's likely
needs at retirement, based on factors such as their health.

The amount exempted under California's CCP 704.115 (e)
varies a lot for different cases. A rule of thumb is
that if the IRA funds are less than $250K, they are
likely to be exempt, but if more than $250K then there
is a chance of getting some of them. This rule often
has exceptions.

Generally, if the IRA funds are less than $150K, you
are probably wasting your time. I am not aware of any
case where a creditor in recent years has successfully
levied an IRA that was less than $150K.

However, contributions to IRAs are sometimes
fraudulent transfers, especially if there was a large
sum recently added. Fraud is usually difficult to
prove, and much tougher to prove if the debtor has been
making small payments all along.

Also, the taxes and penalties that the debtor will be
subject to, are mandatory exemption amounts. It is
sometimes good news when the debtor has borrowed
against their IRA, because that amount will no longer
have the protection of an IRA. Of course, you would
usually have to subpoena such records.